Four Words That Could Destroy Health Insurance for Millions

The Supreme Court will examine the words "Established by the State."

These four words are at the heart of King v. Burwell, a case being argued at the Supreme Court on Wednesday, with a decision expected no later than the end of June. As articulated on the SCOTUSblog, the issue to be decided is "whether the IRS [Internal Revenue Service] may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through exchanges established by the federal government under Section 1321 of the Patient Protection and Affordable Care Act [a.k.a. 'Obamacare', or the ACA]." To put this in simpler terms, what do the words in Obamacare regarding an exchange "established by the State" really mean?

Those four words will impact affording and accessing health insurance for the 9.9 million Americans nationwide who have that care through Obamacare.

Despite its disastrous rollout and less-than-perfect statutory construction, and in spite of the House of Representatives voting last month to repeal Obamacare a 56th time, Obamacare is -- and has always been -- intended to provide all Americans with access to affordable health care. The law is even captioned, "Quality, Affordable Health Care for All Americans."

To provide this care requires a mixture of three interdependent reforms: (1) prohibiting insurers from denying coverage or increasing premiums because of a person's medical history; (2) levying a tax penalty on individuals that fail to maintain healthcare coverage; and (3) issuing federal tax credits intended to subsidize the purchase of insurance by folks who otherwise could not afford it. These credits are made available through what the Act describes as "exchanges" intended to be run by each state itself, and, if not, then run by the federal government acting in the state's place.

But only 16 states and the District of Columbia operate their own exchanges, leaving the federal government to run the exchanges in 34 other states.

According to the government, through 2014, 5.3 million Americans qualified for health plans in these 34 states, with 87% of them qualifying for some sort of subsidy. In some states, this percentage is even higher -- in Mississippi, for example, 94% receive subsidies; in Florida, it is 93%.

The number of Americans without health insurance is at its lowest level in years as a result of Obamacare, according to a report issued in January by the Department of Health and Human Services. Gallup reported that the uninsured rate among American adults dropped 4.2 percentage points (it was 17.2% a little over a year ago) since the ACA's requirement that Americans have insurance went into effect.

In an HHS report released Feb. 9, 6.5 million consumers qualified for an advanced premium tax credit of $268 per month through the federally run exchanges. These credits reduced consumers' monthly premiums by 72%, according to this report.

This all suggests Obamacare is doing what it is intended to do. Quoting once-and-long-gone Chicago mayor Richard J. Daley: "If it ain't broke, don't fix it."

But, led by Jonathan Adler, JD, a law professor at Case Western Reserve University in Cleveland, and Michael Cannon, JM, health policy studies director at the libertarian Cato Institute, there are those who assert that Obamacare does not specifically state that subsidies are available in cases where a state refuses to set up its own exchange, leaving it to the federal government to do the job -- instead, the law says the subsidies are to be made available in exchanges "established by the states."

Without specific legislative authority, so they and their supporters claim, Americans that are eligible for subsidies can no longer obtain them. (Adler, who I'm debating on this subject in April, co-authors with Cannon an excellent description of his theory in a March 2013 article in the journal Health Matrix published by the Case law school. Another of their pieces appear on the Health Affairs Blog website.)

But the four plaintiffs assembled to pursue their theory by the Competitive Enterprise Institute -- an anti-regulatory group -- are, to say the least, dubious ones, with the ACA causing them little, if any, damage as detailed by Stephanie Mencimer in her story for Mother Jones. Dan Mangan of CNBC reported that two of the plaintiffs might have been eligible for health coverage from the Department of Veterans Affairs, a third gave a short-term motel as her address when she joined the suit, and the fourth had projected income in 2014 that exceeds what her employer said they would have paid her.

Where, then, is their damage from Obamacare, and will the Supreme Court decide they have no business suing? While the quality of these plaintiffs may represent, in microcosm, the quality of the merits of the lawsuit, the Court still will probably want to decide the issue and rid itself of it.

In Part 2 of this column, which will run on Tuesday, we will delve more into the merits of the case and possible consequences of a decision.

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